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How Does Car Depreciation Work?

It doesn’t matter if your car is used or new, at some point it is going to decrease in value. This is referred to as car depreciation. Used cars are usually hit a lot less with car depreciation, as it slows the older the car is.

New cars, however, can lose as much as 60 percent in value in the first five years, 20-30 percent loss occurring in the first year alone. Everything is dependent upon the make, model and year of the car. Luxury vehicles tend to keep their value longer, whereas a more standard brand is going to depreciate at a faster rate.

New car depreciation has been fairly consistent over time with an almost guaranteed loss of 20 percent in the first year alone, but the depreciation stalling out around year five. Used cars are a bit more unpredictable as you factor in market changes. In 2008 for example, the financial crisis sent car depreciation soaring. Car worth is also dependent upon which makes and models are popular with car buyers. Both are economic and market factors that are unpredictable when foreseeing whether or not your car is going to be a valuable investment in the next five years.

If you’ve decided to go used, here are a few things you can do to keep your depreciation low:

  1. Make fuel efficiency a priority. Though gas prices are not at an all-time high, drivers still very much care what they will pay at the pump. Opting to buy a vehicle that is fuel efficient has more pros than cons, one of them being that it will help with the resale value.
  2. Opt for features.  You may skip the features if you’re buying new to keep cost down, but luxury helps sell a car and sometimes a buyer is more apt to look for a gently used vehicle with lots of amenities than a new one without any.
  3. Keep your mileage in check. Keep your mileage down as much as possible. The lower the miles, the better the resale value, it’s that simple.
  4. Care about car cleanliness. It may seem like common sense, but keeping your vehicle free from major interior damage such as cracks in the dash or frays in the carpet will help you sell your vehicle! Buyers will judge the car interior as first impression, so if it is less than desirable they won’t care about what is going on underneath the hood.
Collierville Auto Car Experts
Collierville Auto Car Experts
At Collierille Auto, we are true car experts with decades of knowledge and experience. Let us guide you through the ins and outs of the car buying journey. Your ride is waiting, and we're here to help you find it!

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